Letters category: Letters

When 2023 kicked off, there were two storylines every economist, analyst, and financial advisor were keeping an eye on.  Two potential crises that could upend the markets.

We’re referring, of course, to the debt ceiling and the possibility of a recession.

Today, six months later, we’re thrilled to announce that the first potential crisis has been resolved.  There’s good news on the second one as well!

Good news.  That’s a wonderful phrase to hear, isn’t it?

Let’s start with the debt ceiling.  After weeks of negotiations, President Biden and House Speaker Kevin McCarthy struck a deal to suspend the debt ceiling until January 1, 2025.  That removes the possibility of the U.S. defaulting on its debt obligations, which would certainly have triggered a massive recession.

Quick recap in case you haven’t been following this story very closely.  The debt ceiling is “the total amount of money that the United States government is authorized to borrow to meet its existing legal obligations.”¹  What are these obligations? Think Social Security and Medicare benefits.  Military salaries.  Tax refunds and interest payments on Treasury bonds.

The debt ceiling, then, is the limit to what the government can borrow to pay back what it has already spent.  (Or is legally obligated to spend.)

Normally, raising the debt ceiling requires a simple act of Congress.  Some years, however, politicians disagree on whether the ceiling should be raised without a simultaneous decrease in spending or other appropriations.  When this happens, we get a debt ceiling crisis, where the nation comes close to defaulting on its debts.

In this case, Janet Yellen, the Secretary of the Treasury, predicted that the U.S. would default sometime in June if the debt ceiling wasn’t raised.  With that deadline in mind, the President and the Speaker reached an agreement on May 28.  A few days later, Congress approved the deal.

Here’s a brief look at what’s in the deal.  First, and most importantly, is the aforementioned suspension of the debt ceiling.  Rather than raising the ceiling to a new number, Washington has negated the idea of a debt limit altogether for the next eighteen months.  This means the government can borrow above the current limit in order to meet its existing obligations.

In return, both sides of the political aisle have agreed to cap future domestic spending to 1% through the 2025 fiscal year.²  Given that this number is lower than inflation, this effectively amounts to a spending cut.  The deal also ends the White House’s pause on student loan payments, while adding new work requirements for Americans who qualify for food stamps and other government assistance.

For the economy, however, the deal is less important for what it does than for what it prevents.

If the U.S. had breached the ceiling and defaulted on its debt payments, the economic impact would have been severe.  Seniors would have stopped receiving Social Security payments, or at least experienced delays.  Child Tax Credit payments, paychecks for federal employees, veterans’ benefits, Medicare benefits…all would have been either curtailed or delayed.

Less gut-wrenching on a human level, but equally impactful financially, is what a default would have meant for the bond market.  In a default, bondholders would no longer have been paid.  The value of their bonds would have plummeted.  This would have led to dramatically higher interest rates on any new debt issued in the future – which in turn would mean higher rates for everyone.  Given that rates are already higher than they’ve been in years, this would have likely plunged the economy into a deep recession.  And since Treasury bonds are historically the most stable investment in the world, it would probably have disrupted international bond markets, too.  The result?  A global recession.

Thankfully, the debt ceiling deal prevented this crisis from unfolding.  And while politicians on both sides of the aisle are reportedly unhappy with some aspects of the bill, the risk of default was simply too great.

But this wasn’t the only bit of good news in the past week!  We mentioned earlier that there was a second storyline to keep an eye on in 2023: The possibility of a recession.

As you know, the Federal Reserve has been steadily raising interest rates to bring down inflation.  At the start of the year, many economists predicted these rate hikes would lead to mass layoffs and lower consumer spending.  The two main causes, in other words, of most recessions.

Thus far, however, neither of those things has come to pass.  Consumer spending actually rose by 0.8% in April, up from lower increases in February and March.³  The labor market, meanwhile, has proven incredibly resilient.  The most recent report indicated the economy added 339,000 new jobs in May.⁴  That’s far more than experts predicted.  It’s also greater than any single month in 2019, the last year before the pandemic!  The report revised the numbers for March and April, too, with both months bringing more job growth than initially thought.

The upshot of all this is that the economy is doing far better than forecasters expected.  Does it mean a recession is off the table?  No.  But it does mean a recession isn’t a certainty this year, either.

That, is what we call good news.

Now, to be clear, this doesn’t mean market volatility is over, or that hard times aren’t ahead.  For one thing, inflation is proving stubborn, too.  The Federal Reserve may have more interest rate hikes in store.  This could bring renewed uncertainty to the markets in the short term.  In the long term, it could still tip the economy into a recession.  And despite the strong jobs report, the unemployment rate is still technically on the rise.

So, as investors, we must continue to be cautious.  As your financial advisors, we’ll still keep our eye on the markets every day, passing along what we think you need to know.

In the meantime, though, it’s perfectly okay to celebrate good news!  And it’s also perfectly okay for you to “unplug” for a while if that’s what you want.  Savor the summer months.  Spend time with family.  Work on your golf swing.  Take that road trip you’ve been dreaming of, or just relax in a hammock with a nice, cold glass of lemonade.  Our team will keep our eyes on the road ahead so you can enjoy the view out the passenger window.

As always, please don’t hesitate to reach out if you have any questions.  Our door is always open!

Sincerely,

Barbara B. Hudock CIMA®, CPM®
Chief Executive Officer
Founding Partner

Michael J. Hudock, Jr., CPM®
President and Founding Partner
Wealth Consultant

¹ “Debt Limit,” U.S. Department of the Treasury, https://home.treasury.gov/policy-issues/financial-markets-financial-institutions-and-fiscal-service/debt-limit

² “Here’s what’s in the debt ceiling package,” CNN, June 2, 2023.  https://www.cnn.com/2023/05/30/politics/whats-in-the-debt-ceiling-deal/index.html

³ “U.S. Consumer Spending Jumped in April,” The Wall Street Journal, May 26, 2023.  https://www.wsj.com/articles/consumer-spending-personal-income-april-2023-b1b57c31

⁴ “The US economy added 339,000 jobs last month,” CNN Business, June 2, 2023.  https://www.cnn.com/2023/06/02/economy/may-jobs-report-final/index.html

Happy Father’s Day!  Recently, we came across a sweet story on social media that really put the holiday on our minds.  In honor of all fathers, we’d like to share it with you.

Earlier this spring, the staff at the World Bird Sanctuary in Missouri witnessed an unusual sight when an old, male bald eagle named Murphy sat down on a rock.¹

Day after day, Murphy refused to leave the spot, squawking at anyone and anything who came near.  Murphy had lived at the sanctuary for almost thirty years and had never behaved this way before.  Many visitors who saw the eagle worried there was something wrong with it.

But the eagle wasn’t sick.  He wasn’t hurt.  And he wasn’t sad.

For the first time in his life, he was ready to be a dad.

At first, the handlers at the sanctuary were confused.  Normally, bald eagles mate for life, with both parents taking turns incubating their eggs.  But because Murphy’s wing was permanently damaged, he couldn’t be released into the wild.  As a result, he had never fathered eaglets before.  In fact, he had never even mated before.  Already 31-years-old, he seemed destined for a life of bachelorhood.  But something changed in him that first day.  Suddenly, he was ready to be a protector and provider…even if the thing he was protecting and providing for was a rock.

Touched by his parental instincts, the sanctuary staff decided not to interfere, other than moving him – and his rock – to a private enclosure.  Eventually, spring would end.  The rock would never hatch, Murphy would lose interest, and that would be that.

But then one day a new visitor arrived at the sanctuary.  An orphaned eaglet, barely a week old, that had been swept out of its tree during a storm.  Far too young to survive on its own…but still young enough to imprint on a new parent.  Even if that parent was a grumpy old loner.

Lacking other options, the staff decided to pair the little chick with Murphy.  After all, the eagle was clearly in dad mode.  Yet there was a major risk involved.  Again, Murphy had never built a nest before, never cared for eaglets before…and might even see the little newcomer as a threat to his “baby rock.”

But they also knew that every child needs a parent.

So, the next day, they swapped Murphy’s rock with the orphaned chick, held their breaths, and waited.  (Of course, they also took precautions, leaving the eaglet in a heated cage in Murphy’s pen.  That way, the new dad could get to know his new charge without any risk of hurting it.)

After a few days, the staff felt the coast was clear.  They opened the chick’s cage so the two could be properly introduced.  And to their delight, Murphy successfully swapped being a rock dad to being a real dad.  The two conversed back and forth, chirping and peeping at each other.  Soon, the old eagle even started protecting and feeding it.  Later on, Murphy showed the chick how to drink and eat on its own.  How to stretch its wings.  How to clean its beak and feet after a meal.  (And yes, even how to behave whenever the young eaglet started acting naughty.)

Of course, there were some things that Murphy couldn’t do.  He couldn’t teach the chick to fly.  And when a tornado struck nearby, he forgot to keep the chick warm and dry, forcing the staff to do it.  (Hey, even the best dads aren’t perfect.)  But the two bonded beautifully, and in the ensuing weeks, the chick has grown and grown.  Now, the sanctuary team believe they can even release it back into the wild.  In fact, as of this writing, they have already selected a date to do so.

Father’s Day.

***

When we heard this story, «Salutation», it really got us thinking about fatherhood.  About the role fathers play in our lives.  About how important a good father really is.

Fathers come in all shapes and sizes.  Birth fathers and stepfathers; grandfathers and father-figures.  Some dads are gregarious and playful; some strong and silent.  (Some are all of the above!)  Some are good in the garage, some are good in the yard, and some are good in the kitchen.  Some dads are married or in partnerships; others, like Murphy, do it solo.

But the good ones all have something in common: Nothing is more important to them than their kids.

As Murphy no doubt discovered, fatherhood is never easy.  But dads are persistent and tenacious, learning as they go.  Learning what to do and when to do it.  When to push their kids and when to leave them be.  When to be a coach and when to be a friend.  But always being a protector and a provider, in whatever way their family needs.  All dads make mistakes, of course, but the good ones never stop trying to be better…because they always put their kids first.

Thanks to Murphy, that little chick is growing up strong and healthy.  It knows how to take care of itself.  It knows how to be an eagle.  And that’s really what fatherhood is all about, isn’t it?  They’re teachers and role models.  Cheerleaders and caretakers.  Protectors and providers.  Fathers teach us how to grow up.  They teach us how to take care of ourselves.  They teach us how to be the best people we can be.

We’re so grateful for our dads.  And we’re grateful for all the good dads in the world.  The ones who put their kids first.  The ones who teach them how to stretch their wings…so that, one day, they too will take to the air and fly.

On behalf of everyone here at Hudock Capital Group, we wish you a happy Father’s Day!

Sincerely,

Barbara B. Hudock CIMA®, CPM®
Chief Executive Officer
Founding Partner

Michael J. Hudock, Jr., CPM®
President and Founding Partner
Wealth Consultant

¹ “An Eagle Who Adopted a Rock Becomes a Dad,” The NY Times

Every Memorial Day, we as Americans take time to remember the soldiers who died serving our country.  We lay flowers at their graves.  We touch the monuments erected in their memory.  Sometimes, we even walk on the same battlefields where they fought and fell.  Knowing all the while that we wouldn’t be here without them.

In our opinion, this is an American tradition as patriotic as singing the national anthem or reciting the Pledge of Allegiance.  And it makes Memorial Day as important as Independence Day or Thanksgiving.  Saluting our fallen, honoring their sacrifice, and vowing to build on the ground they broke is the least we can do.  Furthermore, we believe it inspires us all to be greater citizens ourselves.

Recently, we came across a speech given by President Woodrow Wilson on May 30, 1914, at the National Cemetery in Arlington.  At the time, Memorial Day already had a long history, but it was not yet as standardized as it is today.  But with the last veterans of the Civil War passing away, and new storm clouds gathering over Europe – World War I would break out a few months later – more and more Americans were realizing the importance of giving thanks to those who gave their lives.

Wilson’s speech – which he apparently gave without any preparation – perfectly describes why this is such a vital tradition.  In honor of the holiday, we thought we would share some excerpts from it with you.  We hope the words touch your heart as much as they have ours.

We are so grateful for this nation.  We are so humbled by the knowledge others died so that our country might live.  Now, it is our job to ensure their memories forever live on, too.

On behalf of everyone here at Hudock Capital Group, we wish you a safe and peaceful Memorial Day.

Sincerely,

Barbara B. Hudock CIMA®, CPM®
Chief Executive Officer
Founding Partner

Michael J. Hudock, Jr., CPM®
President and Founding Partner
Wealth Consultant

P.S. You can find the full version of this speech here: www.presidency.ucsb.edu/documents/memorial-day-address

Memorial Day Address
Given by Woodrow Wilson, 28^th President of the United States, on May 30, 1914

Ladies and Gentlemen, I have not come here today with a prepared address. But I will not deny myself the privilege of joining with you in an expression of gratitude and admiration for the men who perished for the sake of the Union. They do not need our praise. They do not need that our admiration should sustain them. There is no immortality that is safer than theirs. We come not for their sakes but for our own, in order that we may drink at the same springs of inspiration from which they themselves drank.

Whenever a man who is still trying to devote himself to the service of the Nation comes into a presence like this, or into a place like this, his spirit must be peculiarly moved. A mandate is laid upon him which seems to speak from the very graves themselves. Those who serve this Nation, whether in peace or in war, should serve it without thought of themselves. I can never speak in praise of war, ladies and gentlemen; you would not desire me to do so. But there is this peculiar distinction belonging to the soldier, that he goes into an enterprise out of which he himself cannot get anything at all. He is giving everything that he hath, even his life, in order that others may live, not in order that he himself may obtain gain and prosperity. And just so soon as the tasks of peace are performed in the same spirit of self-sacrifice and devotion, peace societies will not be necessary. The very organization and spirit of society will be a guaranty of peace.  Therefore, this peculiar thing comes about; that we can stand here and praise the memory of these soldiers in the interest of peace. They set us the example of self-sacrifice, which if followed in peace will make it unnecessary that men should follow war anymore.

We are reputed to be somewhat careless in the use of the English language, and yet it is interesting to note that there are some words about which we are very careful. We bestow the adjective “great” somewhat indiscriminately. A man who has made conquest of his fellow-men for his own gain may display such genius in war, such uncommon qualities of organization and leadership that we may call him “great,” but there is a word which we reserve for men of another kind and about which we are very careful. That is the word “noble.” We never call a man “noble” who serves only himself; and if you will look about through all the nations of the world upon the statues that men have erected, you will find that almost without exception they have erected the statue to those who had a splendid surplus of energy and devotion to spend upon their fellow-men. Nobility exists in America without patent. We have no House of Lords, but we have a house of fame to which we elevate those who, forgetful of themselves, study and serve the public interest, who have the courage to face any number and any kind of adversary, to speak what in their hearts they believe to be the truth.

We admire physical courage, but we admire above all things else moral courage. I believe that soldiers will bear me out in saying that both come in time of battle. I take it that the moral courage comes in going into the battle, and the physical courage in staying in. There are battles which are just as hard to go into and just as hard to stay in as the battles of arms, and if the man will but stay and think never of himself there will come a time of grateful recollection when men will speak of him not only with admiration but with that which goes deeper – with affection and with reverence.

So that this flag calls upon us daily for service, and the more quiet and self-denying the service, the greater the glory of the flag. We are dedicated to freedom, and that freedom means the freedom of the human spirit. All free spirits ought to congregate on an occasion like this to do homage to the greatness of America as illustrated by the greatness of her sons.

It has been a privilege, ladies and gentlemen, to come and say these simple words, which I am sure are merely putting your thought into language. I thank you for the opportunity to lay this little wreath of mine upon these consecrated graves.

Happy Mother’s Day!

A few weeks ago, I was thinking about what sort of flowers to send to my mom. In doing so, I started researching the deeper significance behind many types of flowers. Doing so really made me think about my own mom and all the things she means to me. So, in honor of the holiday, I thought I’d share a few of the things I learned with you.

Carnations

Carnations – especially white ones – are often seen as the official flower of Mother’s Day. The reason for this has to do with the very origins of the holiday. In 1907, a woman named Anna Jarvis began writing to many prominent figures of her time. Teddy Roosevelt was one, and Mark Twain, too. Her goal was to proclaim a national day for recognizing mothers. She then organized local Mother’s Day celebrations in her community and encouraged people to write letters to their mothers. As part of her efforts, she sent five hundred white carnations – her own mother’s favorite flower – to all the women in attendance at her local church. The tradition caught on and spread around the country.

These days, carnations represent purity, love, beauty, and kindness. They represent the emotional connection between a caring mother and a loving child.

Azaleas

Azaleas symbolize womanhood in some eastern cultures. In China, they are also known as the “thinking of home bush.” That’s because they were often featured in traditional poetry to represent a longing for one’s family and the warmth of home. Given that Mother’s Day is a day to not only think of home, but call, write, or visit home, I think they make a great holiday flower!

Daylily

While the azalea symbolizes womanhood, the daylily specifically symbolizes motherhood. In ancient times, women hoping to give birth to sons would wear daylilies.

By tradition, sons would also give their mothers daylilies as a birthday gift to show their love and gratitude. And that’s what Mother’s Day is really all about, isn’t it?

Bluebells

Bluebells don’t have any specific connection to Mother’s Day, as far as I can tell. But they are still a popular flower because they symbolize peace, calm, humility, and reliability. I know many who would say these are the very traits they love most about their own mothers, so they’re also a good choice for the holiday!

Camellias

Like some other flowers on this list, camellias have a long history in countries like China and Japan. In many cultures, they represent adoration, gratitude, and never-ending love. Just the feelings, I hope, that most of us feel for our wives, mothers, and grandmothers.

Gerbera Daisies

Finally, we have daisies. These bright, colorful flowers represent cheerfulness and happiness. Given how hard many mothers work to instill these feelings in their homes, I think that makes them a great Mother’s Day gift, too.

***

As you know, it’s traditional to give flowers for Mother’s Day. Learning more about these types of flowers gives us a chance to not only think about their deeper meaning but about what our mothers truly mean to us. They give us a chance to reflect on the relationships we have with the mothers and mother-figures in our lives. To recall the specific traits and gifts our mothers have that we most appreciate. And when we choose a specific flower, rather than just choosing one by default, we can even let our mothers know what it is about them we are most grateful for.

I’m so grateful for my mom. I’m grateful for everything she does for me. Everything she’s taught me. I’m grateful for who she is– the quirks and qualities that make her beautiful and unique. So, this Mother’s Day, when I look at the flowers in people’s gardens, an arboretum, a florist’s shop, or wherever, I want to take the time to think about what they mean…so I can better appreciate what my own mom means to me.

On behalf of everyone here at Hudock Capital Group, I wish you a very Happy Mother’s Day!

Sincerely,

Michael J. Hudock, Jr., CPM®
President and Founding Partner
Wealth Consultant

Happy Easter!

As you know, the Eastertime is a very special one for people of varying faiths, cultures, and traditions.  One thing that has always fascinated us, though, is how Easter symbolizes growth and renewal.  That’s no surprise – this is also the time of year when flowers bloom, hibernating animals emerge, and many species give birth to their young.  In fact, in ages past, people actually thought of Easter – and spring in general – as a time for new resolutions and new beginnings instead of the beginning of the calendar year like we do today.

Every year, we think it’s fun to celebrate the spirit of the Easter season in a new way.  Here are a few of our favorite traditions for this time of year from various places around the world:

Cherry Blossom Festival – Japan
The significance of the cherry blossom tree in Japan goes back hundreds of years.  In Japan, each year the people look forward to the blooming of the cherry blossom trees.  It is a time for families and friends to gather, picnic, and enjoy music and drink.

The Songkran Festival – Laos
In April the country of Laos turns into a giant water fight in celebration of its New Year.  Think of it as a way of washing out the old to bring in the new.  This tradition falls at the peak of the dry season and extensive heat.  During this time, homes and holy places alike are cleaned.  You may also get soaked while walking down the street—all in good-natured fun, of course!

Sechselauten – Switzerland
The end of this holiday is the burning of winter, a figure of a snowman filled with explosives.  This is hardly subtle, but it’s sure an effective way to celebrate the start of a new season of growth and life!  And for Easter proper, children in Zurich will hold a hard-boiled egg in their hands while an adult tries to throw a coin in such a way that it will lodge in the shell.  If the coin falls to the ground, the child gets to keep both the egg and the coin.  This is a way for children to begin the season with hope and expectation.

Ostern – Germany
Easter in Germany is referred to as Ostern.  There, they serve fish on Good Friday, have a large bonfire on Saturday, and exchange particularly well-decorated eggs with friends and family on Easter Sunday.  All three make a great way to kickstart the spring!

Ostern – Austria
Ostern in Austria is a little different.  There, the season begins with Maundy Thursday, or Green Thursday.  Green food is eaten all day.  This is a way of celebrating the growth that comes with spring.

These celebrations remind us that this truly is a season of renewal and personal growth.  Personally, we find that Easter always brings a renewed outlook on the possibilities of life during this beautiful time of year.  It’s a wonderful opportunity to appreciate the sights, sounds, and smells of a fresh new world.  It’s an opportunity to participate in an old tradition, or even start a new one.

It’s an opportunity to make our lives whatever we want them to be.

On behalf of everyone at Hudock Capital Group, we wish you a Happy Easter, a Happy Spring, and a Happy Rest of the Year!

Sincerely,

Barbara B. Hudock CIMA®, CPM®
Chief Executive Officer
Founding Partner

Michael J. Hudock, Jr., CPM®
President and Founding Partner
Wealth Consultant

For most of us, the words “bank failure” immediately trigger the same recent memory: the financial crisis of 2008. That was a year no investor could ever forget. The year some of the largest, most storied financial institutions in the world — think Lehman Brothers, Bear Stearns, and others — collapsed, never to return.

Similarly, for anyone who has studied history, the words “run on the bank” immediately trigger images of the early days of the Great Depression. For others, it’s perhaps scenes from It’s a Wonderful Life.  (Or Mary Poppins, if you prefer.)  Dramatic moments now consigned to the waste bin of time. Surely not something that could happen in this day and age.

But on Friday, March 10, all these words — bank failure, bank run – happened to the Silicon Valley Bank in northern California. It’s an event that has many investors, scarred by the memory of 2008, wondering if the same thing could happen to other banks.  An event that has only added to the fearful mood currently pervading the markets.

As you probably know, when the news broke on Friday morning, all three major indices immediately tumbled, capping off a rough week for the markets.  So, we want to briefly explain what’s going on with this semi-obscure bank and why it spooked investors.  Then, we want to go over what we can learn from it.

Prior to collapsing, Silicon Valley Bank was the 16^th largest in the country, holding approximately $209 billion in assets.¹  If you’ve never heard of it before, it’s probably because the bank specialized in lending money to start-up companies; the kind of fledgling tech firms Silicon Valley breeds each year.  Now, it has the dubious distinction of being the largest bank to fail since 2008.¹

So how did a bank this large fail so suddenly?  Truth be told, it’s a tale that anyone who lived through 2008 also remembers well: The bank simply made too many bad decisions at precisely the wrong time.  During the pandemic, tech companies saw a surge in business.  This led to a host of new, hopeful tech companies popping up, each flush with venture capital.  As a result, banks that specialize in serving these types of companies enjoyed their own surge: A surge in deposits.

Silicon Valley Bank (SVB) was one of these banks.  But while business was booming, this was also when the problems started.  You see, like most banks, SVB only keeps a fraction of its deposits in-house at any given time.  The rest is lent out or invested.  In this case, SVB purchased tens of billions of dollars in U.S. Treasury bonds.

To be fair, there was a certain logic here.  Treasury bonds are historically seen as one of the safest investments in the world.  Given the market uncertainty we saw during the pandemic, the bank probably thought it was being prudent with customers’ money.  Unfortunately, the bank forgot one important detail: While Treasurys don’t usually see the kind of volatility that stocks or other securities do, they are vulnerable to a very specific kind of risk.  The risk of rising interest rates.

While this was going on, the economy started changing.  Inflation skyrocketed.  Interest rates, in turn, rose to the highest levels in decades.  That meant all those Treasurys purchased when interest rates were low were suddenly far less valuable.  (Newer government bonds pay far more in interest than those purchased before the rate hikes began.)  At the same time, those tech companies that profited during the pandemic saw business – and their stock prices – fall.  For SVB, that meant fewer and fewer deposits coming in.  Suddenly, SVB was faced with a nightmare scenario: A lack of liquidity and a lack of new funds.

None of that might have mattered so long as customers didn’t start withdrawing their money.  Of course, that’s exactly what happened.  Faced with their own economic distress, all those tech companies – and their executives – started asking for their money back.  Given that they only kept a fraction of that money in reserve, SVB had no choice but to sell its investments at a major discount.  The result was a major loss of nearly $2 billion, which the bank revealed earlier in the week.¹

When news of the situation got out, customers began panicking.  This led to a classic, seldom-seen-but-much-feared scenario: A run on the bank.

In the days that followed, the bank was unable to stop the bleeding.  So, on Friday, the government stepped in and took control of the bank’s remaining $175 billion in customer deposits.²

Okay.  That’s the story.  But why the impact on the markets?

Aside from being eerily similar to 2008 – a bank makes risky financial decisions at the exact wrong time and crumbles – the situation has investors wondering if there are other banks out there that might soon experience the same problem.  No surprise, then, that shares of banks with similar business models have fallen sharply over the last two days.

But it’s more than that.  Right now, investors are gripped with fears of a recession.  On the surface, that may seem counterintuitive, as most areas of the economy remain in decent health.  But until the economy cools down, inflation will continue to run hot…which means the Federal Reserve will continue to raise interest rates.  (Indeed, the Fed chairman announced on March 8 that he expects rates to rise “higher than previously anticipated.”)³

With each rate hike, the threat of a recession grows larger.

Right now, investors are hyper-sensitive to anything that looks like the first sign of a recession.  And the failure of a major bank certainly qualifies.  Hence the turmoil we’ve seen in the markets this week.  Hence the volatility we may keep seeing.

So, what can we learn from this?  To our minds, there are a few lessons:

1. When making investing decisions, always prioritize your long-term goals. In the wake of the pandemic, SVB made too many short-term decisions that locked up its long-term options.  We will never do that.  Here at Hudock Capital Group, our approach will always be to take the slower-but-surer path to your financial goals.  We will always emulate the tortoise, not the hare.
2. Never forget the importance of liquidity. We are not a bank.  We are human beings, and human beings must contend with the unexpected.  That means we sometimes need quick access to our money.  That’s why we will always invest, save, and plan accordingly.
3. Hold to our long-term strategy and never invest based on stories or emotions. Right now, too many investors are trying to divine when a recession will strike.  They are overreacting to every headline.  We won’t do that, either.

We are experiencing a time of uncertainty in the markets.  Such times are rarely fun, but they’re not unexpected.  The good news is that our team continues to have confidence in both our long-term strategy and the road you are taking toward your financial goals.  We will continue to monitor the markets very carefully and keep you updated on what’s going on.

In the meantime, please let us know if you have any questions or concerns.  We are always here for you.  Have a great month!

Sincerely,

Barbara B. Hudock CIMA®, CPM®
Chief Executive Officer
Founding Partner

Michael J. Hudock, Jr., CPM®
President and Founding Partner
Wealth Consultant

¹ “Silicon Valley Bank Closed by Regulators, FDIC Takes Control,” The Wall Street Journal, March 10, 2023.  https://www.wsj.com/articles/svb-financial-pulls-capital-raise-explores-alternatives-including-possible-sale-sources-say-11de7522

² “Silicon Valley Bank Fails After Run by Venture Capital Customers,” The NY Times, March 10, 2023.  https://www.nytimes.com/2023/03/10/business/silicon-valley-bank-stock.html

³ “Fed Chair Powell says interest rates are ‘likely to be higher’ than previously anticipated,” CNBC, March 7, 2023.  https://www.cnbc.com/2023/03/07/fed-chair-powell-says-interest-rates-are-likely-to-be-higher-than-previously-anticipated.html

If you’re a big fan of St. Patrick’s Day like we are, you will wake up on the 17^th, daydreaming of what’s to come. You can smell delicious, corned beef, cabbage, and the faint richness of Guinness floating in the air. You can almost taste it. Everywhere you look, you’re seeing green. Shamrocks on clothing, grand banners, even the milk! Everyone seems to be in a giddy mood, there’s an electricity in the air, you feel it. You’re looking forward to the parade tonight where you’ll watch and listen as the space fills up with laughter and smiles.

We know we’re not the only ones dreaming of the festivities. Countless people honor St. Patrick’s Day. In fact, this holiday gets observed on an international level – over 200 countries take part in the celebration! Can you believe it? We love learning how countries show their pride for the Irish holiday and wanted to share a few with you.

Chicago, Illinois –Every year since 1962, Chicago dyes the river a beautiful bright green before the St. Patrick’s Day parade. It’s quite the spectacle, everyone comes out to watch the magic of the river changing colors. The recipe for the magic dye is a well-guarded secret; perhaps leprechaun trickery is involved?

Sydney, Australia – Australia currently holds the title for the largest St. Patty’s celebration in the southern hemisphere. Not only is the Sydney Opera House lit up with green lights, the town gets a full makeover! The entire area is transformed into an Irish village with food, music, and even a children’s parade. They’ve earned those bragging rights.

Montserrat – Outside of Ireland, this small island is the only country where March 17^th is a national public holiday. There, the festival spans over a 10-day period! It both commemorates the slave freedom fighters’ rebellion of 1768 and acknowledges the Irish ancestry of many of its inhabitants. It’s a unique celebration blending two heritages with traditional masquerade costumes, steel drums, goat stew, and a freedom run.

Rio de Janeiro, Brazil – The massive 98-foot Christ the Redeemer Statue gets a glowing transformation for the holiday. The emerald lights illuminate the statue in honor of St. Patrick’s Day. At night, the local Irish pubs host special events that include live music, trivia, and fun giveaways.

As you can see, St. Patrick’s Day is a worldwide phenomenon!  Hopefully this letter was able to give you a little glimpse of how the event is observed around the globe.  Now that we’ve gotten you into the spirit of St. Patrick’s Day, you can feel confident celebrating the holiday however you wish. Maybe you can even start up some new traditions of your own. Whatever you decide, may the luck o’ the Irish ever be on your side!

Sincerely,

Barbara B. Hudock CIMA®, CPM®
Chief Executive Officer
Founding Partner

Michael J. Hudock, Jr., CPM®
President and Founding Partner
Wealth Consultant

Napoleon.  Franco.  Julius Caesar.  History is filled with examples of generals who became dictators.  But there’s one shining example of a general who didn’t, and we celebrate his birthday every February.

We’re referring, of course, to George Washington.

Future historians would have hardly batted an eye had Washington proclaimed himself king after defeating the British.  Nor would they have been surprised if, after being elected president, he simply kept the office for life.

But Washington was not that type of man.

The Newburgh Conspiracy

March, 1783.  The fate of the future United States hung in the balance, though few probably realized it at the time.  That’s because a conspiracy was in the works – a conspiracy, some historians believe, that would have led to a revolt against the government if left unchecked.¹

It’s not hard to understand why.  Despite numerous promises from Congress, the Continental Army had not been paid in months, A few days before, an anonymous letter began circulating among the officers, announcing a meeting to discuss all the ways they’d been wronged.  Then, a second, much more serious letter appeared.  The Army, the letter said, should officially condemn Congress for their inaction.

Whispers began to flit through the camp.  Perhaps condemning was not enough.  Perhaps the Army should turn away from the British and refuse to fight altogether.   Others went further.  Perhaps the real enemy was in Philadelphia.  Perhaps the Army should go there – and seize the government.

There’s no question the whispers reached Washington’s ears.  It’s impossible to know if he was tempted, even for a moment.  Could anyone blame him if he seized power for himself?  It had been done before.  It would be done again.

But instead, Washington sat down to write a message of his own.

A fateful meeting

On March 15, the officers assembled for a meeting in Newburgh, New York – and found Washington there to preside over it.  They were surprised.  Some thought Washington actually agreed with the anonymous letter, since he had not officially canceled the meeting.  Most thought, at the very least, that he was unlikely to attend.

But attend he did.

In an instant, Washington could tell the situation was serious.  His officers’ faces showed that plainly, as many failed to show the respect they usually did for their commander.  Undeterred, Washington read the remarks he’d written in the days before.  The Army should be patient, he urged, and avoid doing anything that caused discord.

“Let me entreat you, gentlemen, on your part, not to take any measures, which viewed in the calm light of reason, will lessen the dignity, and sully the glory you have hitherto maintained; let me request you to rely on the plighted faith of your country, and place a full confidence in the purity of the intentions of Congress.”¹

The officers were unmoved.  They expected this.  In fact, one of the anonymous letters had predicted Washington would preach “moderation and forbearance.”²

Seeing their stony faces, Washington moved onto Plan B.  He produced a letter from his breast pocket.  The letter was from a Congressman, but just as Washington was about to read, he hesitated.

For a long moment, Washington stared at the letter, unspeaking. The officers looked at each other.  Then, slowly, Washington produced something else from his pocket, fumbling at it with trembling fingers.

It was a pair of eyeglasses.

“Gentlemen,” Washington said, “you must pardon me, for I have grown not only gray but blind in the service of my country.”³

The officers were stunned.  They had never seen Washington wear glasses before, nor admit to any disability.  One by one, they bit their lips.  Lowered their heads.  And began to weep.

Washington, they realized, had worked as much, struggled as much, and suffered as much as any of them.  Yet he would not condemn or overthrow Congress.  He would not seize power for himself.  He would not destroy this experiment in liberty, only scarcely begun.

And so, the officers voted – to express “unshakeable” confidence in Congress and loyalty to their country.  The conspiracy was over, and the nation saved, all because of a man who would not be king.

This Presidents’ Day, we hope we can take a few minutes to ponder our country and the life of the man who fathered it.  We hope we can remember George Washington.

Happy Presidents’ Day!

Sincerely,

Barbara B. Hudock CIMA®, CPM®
Chief Executive Officer
Founding Partner

Michael J. Hudock, Jr., CPM®
President and Founding Partner
Wealth Consultant

¹ “Washington puts an end to the Newburgh Conspiracy,” History.com, December 13, 2009.  https://www.history.com/this-day-in-history/washington-puts-an-end-to-the-newburgh-conspiracy

² “George Washington’s Tear-Jerker,” New York Times, February 14, 2010.  https://www.nytimes.com/2010/02/15/opinion/15miller.html

³ “Newburgh Conspiracy,” Wikipedia, https://en.wikipedia.org/wiki/Newburgh_Conspiracy

If there’s one thing we’ve learned over the years as a financial advisor, it’s that it’s never too late to dream a new dream…or achieve one, either.

Recently, we read a story that proved just how true this is.  Allow us to introduce you to a man named Manfred Steiner.

Back in late 2020, Steiner earned a Ph.D. from Brown University in physics.  As you know, graduating from college is a great achievement.  Graduating from an Ivy League school, even more so.  Earning a Ph.D. in one of the most difficult and complicated subjects known to man?  That’s just staggering.

But none of that is what makes Steiner’s story so noteworthy.  What’s noteworthy is that he did it all at the age of 89.

You read that right.  A Ph.D. in physics at 89 years old!!!  (That sentence probably deserves a few extra exclamation marks.)

When Steiner was young, he dreamed of being a physicist.  But his family urged him to be a doctor instead, so he earned his medical degree and became a hematologist.  He even served as the Head of Hematology at Brown’s medical school.

Steiner’s career was long and fruitful, and like many people, he decided to cash in his chips and retire at age 70.  Thankfully for him, and for the world, Steiner understood that retirement isn’t the end of a journey.  It’s the start of one.

More specifically, retirement is a chance not only to do what you’ve always wanted to do but be what you’ve always wanted to be.  And Steiner still wanted to be a physicist.  So, he set about becoming one.  It was a lifelong goal, and he still had a long life to live.  Back to Brown he went, taking one or two classes each semester.  (Because, hey, retirement is also about relaxing.)

In a few years, he earned his bachelor’s degree – but he wasn’t finished.  As he puts it, “I thought, ‘Why not continue now? I might as well get a Ph.D.  It’s always been my dream.  I wanted this.’”¹

So, he kept taking classes.  Kept reading books.  Kept doing homework.  Kept writing papers.  Kept passing tests.  (No word on whether he availed himself of the other joys of college life – we suspect he was too busy.)  Slowly but surely, he mastered the science of physics.  Until, finally, nineteen years after retirement, he wrote his dissertation on “Corrections to the Geometrical Interpretation of Bosonization”. ¹

We confess, we don’t know what that means – but it was the final step in earning his PhD.  (A dissertation, by the way, is more than just a simple essay or research paper.  It’s an original work that “contributes knowledge, theory, or methods to a field of study”.  Meaning that, in years to come, other students may well study Steiner’s writings to increase their own knowledge!)

In some ways, we think that’s the coolest thing of all: That no matter how old you are, you can not only achieve your goals, but can also add to the collective knowledge of the world.

“I was elated,” Steiner said after receiving the honor.  “I mean, I made it!  I really made it.” ¹

So, what is the world’s newest octogenarian physicist going to do now?

Simple: Do physics!

As Steiner says, “I’ve reached what I’ve always wanted.  Now, I want to do it.  I know I’m going to be 90 soon, but physics is what interests me, and this is what I want to end my life with.” ¹

***

Every January, many of us set new goals and make new resolutions.  Some people question the point of this endeavor.  After all, not everyone succeeds in what they want.  But whether we’ve tried something and failed…

Or if we once had a goal but were forced to put it aside for other concerns…

Or if we simply didn’t dare to dream at all, because the star we sought seemed too far away…

It is never too late to start.  It is never too late to dream.  And it is never too late to do. 

Manfred Steiner proves it.

So, as we enter a New Year, go and dream that dream no matter what it is or where you are in life.  There’s no doubt in our minds you’ll achieve it.  After all, why not?

It’s just physics.

Sincerely,

Barbara B. Hudock CIMA®, CPM®
Chief Executive Officer
Founding Partner

Michael J. Hudock, Jr., CPM®
President and Founding Partner
Wealth Consultant

¹ “89-year-old retiree earns Ph.D. in physics from Ivy League school,” CBS News, November 22, 2021.  https://www.cbsnews.com/news/manfred-steiner-89-retiree-physics-phd-ivy-league-school/

² “Dissertation vs Thesis: Key Differences,” Wordvice, https://blog.wordvice.com/dissertation-versus-thesis-key-differences-3/

When we were kids, we used to focus on what we would get every Christmas.  What presents would we open on Christmas morning?  What surprises would we find in our stocking?  What items would Santa actually deliver from our list?  Had we been good enough that year?

As we got older and started families of our own, our focus began to change.  Instead of looking forward to what we would get on Christmas, we started taking more pleasure in what we could give.  The real joy, we found, was seeing the expressions on our loved ones’ faces as they opened their gifts and saw what we had lovingly made or bought for them.

We think this is a very natural progression.  Most people, we imagine, go through the same transition as they grow up.  The pleasure of getting replaced by the joy of giving. 

Over the years, however, we’ve found that giving is about more than just buying the latest gadget or putting something special in a box.  We’ve found that the real joy of Christmas is in showing and sharing our love to and with the people around us.  Family, friends, neighbors, our team, our clients…all the little things we can do, and all the little things they do for us, is what really makes Christmas special.  Sometimes that little thing might be a gift; other times, it might be a service.  Sometimes it might be a kind word; other times, a shared activity or time-honored tradition.  Either way, with each passing year, giving around Christmastime has become what we look forward to most as getting recedes into the background.

Recently, a friend shared a story with us that we think illustrates this feeling.  It’s an old folk story, one of the many collected and published by the Brothers Grimm back in the 1800s.  Unlike some of their stories, this one is not a dark, cautionary tale, but a light and cheerful one. It’s a simple fable that perfectly encapsulates the warmth and spirit of Christmas.  We hope you enjoy reading it as much as we did.

The Elves and the Shoemaker

There was once a shoemaker, who worked very hard and was very honest, but as times were hard, he could not earn enough to live upon.  Despite his efforts, at last, all he had in the world was gone, save just leather enough to make one final pair of shoes.

Then he cut his leather out, all ready to make up the next day, meaning to rise early in the morning to his work. His conscience was clear and his heart light amidst all his troubles; so, he went peaceably to bed, left all his cares, and soon fell asleep. In the morning he sat himself down to his work, when, to his great wonder, there stood the shoes already made upon the table. The good man knew not what to say or think at such an odd thing happening. He looked at the workmanship; there was not one false stitch in the whole job.  All was so neat and true that it was quite a masterpiece.

The same day a customer came in, and the shoes suited him so well that he willingly paid a price higher than usual for them; and the poor shoemaker, with the money, bought leather enough to make two pairs more. In the evening he cut out the work, and went to bed early, that he might get up and begin betimes next day; but he was saved all the trouble, for when he got up in the morning the work was done ready to his hand. Soon in came buyers who paid him handsomely for his goods, so that he bought leather enough for four pair more. He cut out the work again overnight and found it done in the morning, as before; and so it went on for some time: what was got ready in the evening was always done by daybreak, and the good man soon became thriving and well-off again.

One evening, about Christmas-time, as he and his wife were sitting around the fire chatting, he said to her, “I should like to sit up and watch tonight, that we may see who it is that comes and does my work for me.” The wife liked the thought, so they left a light burning, and hid themselves in a corner of the room and watched what would happen.

As soon as it was midnight, there crept in two little naked elves.  They sat themselves upon the shoemaker’s bench, took all the work that was cut out, and began to ply with their little fingers, stitching, rapping, and tapping away at such a rate, that the shoemaker could not take his eyes off them. And on they went, till the job was quite done, and the shoes stood ready for use upon the table. This was long before daybreak, and then they bustled away as quick as lightning.

The next day the wife said to the shoemaker, “These little elves have made us rich, and we ought to be thankful to them, and do them a good turn if we can. I am quite sorry to see them run about as they do, for they have nothing upon their backs to keep off the cold, and it is nearly Christmas. I’ll tell you what, I will make each of them a shirt, and a coat and waistcoat, and a pair of pantaloons into the bargain, while you make each of them a little pair of shoes.”

The thought pleased the good cobbler very much; and one evening, when all the things were ready, they laid them on the table, instead of the work that they used to cut out, and then went and hid themselves, to watch what the little elves would do.

About midnight in they came, dancing and skipping, hopped round the room, and then went to sit down to their work as usual; but when they saw the clothes lying for them, they laughed and cried and danced, and seemed mightily delighted.

Then they dressed themselves in the twinkling of an eye, and danced and capered and sprang about, as merry as could be; till at last they danced out at the door, and away over the green.

The good couple saw them no more; but everything went well with them from that time forward, as long as they lived.

We love this story and all its characters, who think only of giving, never getting – and in doing so, get more than they could have ever hoped.  And we love this season and all the feelings that come with it!  So, on behalf of everyone here at Hudock Capital Group, we wish you a very Merry Christmas and a Happy New Year.  May your holidays be as magical as the shoemaker’s, filled with goodwill and good cheer.

Sincerely,

Barbara B. Hudock CIMA®, CPM®
Chief Executive Officer
Founding Partner

Michael J. Hudock, Jr., CPM®
President and Founding Partner
Wealth Consultant